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Keywords: Competitive strategy, Value analysis, Competitive advantage, Market position, Innovation
Corporate strategy is heavily influenced by its military roots. The very language of strategy is imbued with military references - chief executive "officers" in "headquarters", "troops" on the "front lines." Described this way, strategy is about confronting an opponent and fighting over a given piece of land that is both limited and constant. Traditionally, strategy focused on beating the competition, and strategic plans are still couched in warlike terminology. They exhort companies to seize competitive advantage, battle for market share, and fight over price. Competition is a bloody battlefield.
The trouble is that if the opposing army is doing exactly same thing, such strategies often cancel each other out, or trigger immediate tit-for-tat retaliation. Strategy quickly reverts to tactical opportunism. So where should companies turn for a more innovative approach to strategy?
The answer lies with something we call blue-ocean strategy. We argue that head-to-head competition results in nothing but a bloody red ocean as rivals fight over shrinking profits. Success comes not from battling competitors, but from making the competition irrelevant by creating "blue oceans" of uncontested market space. The creators of blue oceans don't use the competition as their benchmark. Instead, they follow a different strategic logic that we call value innovation. Value innovation is the cornerstone of blue-ocean strategy. We call it value innovation because instead of focusing on beating the competition in existing market space, you focus on getting out of existing market boundaries by creating a leap in value for buyers and your company which leaves the competition behind.
These ideas challenge conventional strategic thinking and are supported by extensive research. Over the past decade, we have created a database that covers more than 30 industries going back over 100 years. So what does all this data show?
We believe that the business world has been overlooking one of the key lessons of wealth creation in history. Our research indicates that the major source of wealth creation over time is not the industry that a company plays in per se. Nor did we find permanently great companies that consistently created and captured wealth.
History reveals that there are neither perpetually excellent companies nor perpetually excellent industries. Companies and industries...